The on-off-on-off saga of Trinity Mirror’s bid to buy Richard Desmond’s Express newspaper empire finally appears to be all over bar the shouting with a price tag set at around £135m.
Only a shareholder revolt by Trinity Mirror’s institutional investors or an intervention to block it by the CMA (the Competition and Markets Authority) stands in the way. But neither seems likely to do so.
Trinity Mirror chief Simon Fox, who has made ‘consolidation’ his business mantra, has almost certainly sounded out the key major shareholders already. And, despite the political sensitivity surrounding media ownership issues, such is the parlous state of newspaper economics these days that the CMA are highly unlikely to scupper the deal even if they, and the Government, decide it should come under scrutiny.
The deal agreed in principle announced today is very much in line with that predicted in The Drum by me back in January this year.
The stumbling blocks behind the several delays centre on Richard Desmond’s famed determination to drive a hard bargain. Trinity was originally trying to buy Desmond’s publishing assets for less than £100m. But the agreed price of £130m-£135m will leave the Express owner with a gigantic smile on his face.
Having paid £125m to buy the Express group from United Media back in 2000, Desmond has made hundreds of millions of £s over the intervening years, despite plunging circulation, and massive job-cutting exercises.
The flamboyant former porn publisher scored a similar success when he sold Channel 5 to America’s Viacom media giant for £463m after acquiring it from German media company RTL for £103m.
The agreed deal now includes all of Desmond’s Northern & Shell publishing assets , ranging from the Daily and Sunday Express, the Daily and Sunday Star and OK!, New! and Star! celebrity magazines.
Recently Richard Desmond told me that his ambition was to leave the media industry and expand into commercial property development. The outgoing Express owner is listed in the top 50 of the Sunday Times Rich List in the UK, with a personal fortune of around £2.3bn.
Trinity Mirror’s latest takeover move came after a wider deal – led by former Mirror Group chief executive David Montgomery – to combine the back office and sales businesses of the two publishers failed following several months of negotiations. (Montgomery, who is known to have explored seeking backing for his own takeover bid, has also acted at some point as an advisor to Richard Desmond).
Fox sees the deal as another extension of his philosophy of ‘consolidation’ as the antidote to plunging circulation figures, along with his hefty investment in developing Trinity Mirror’s digital platforms.
Already Britain’s largest regional publisher, Fox flagged up his philosophy when he paid a generous £220m to buy the Local World newspaper group created by David Montgomery before making overtures to Richard Desmond.
Unquestionably this is a deal that makes sense (at least in the short term) in commercial terms, with the merging of back office operations, advertising, marketing, promotions and circulation teams, and the inevitable job cull that will come with it; but it will also ring alarm bells among many journalists in both companies.
The juggling act of having the UKIP/Tory Right wing, pro-Brexit Express titles set alongside the traditional Labour, pro-Remain Mirror titles, will prove fascinating not just for media commentators but for politicians of the right and the left as well. And how the newspapers’ dwindling readerships on both sides will react, should prove equally intriguing.
At the moment it appears that Trinity Mirror’s plan will be keeping all the Express and Mirror titles going rather than seek to merge them, given their contrasting identities and political standpoints.
But many journalists are known to be concerned that they will be asked to work across both titles and that could create management headaches.
As one senior Mirror journalist put it to me: “Although it wouldn’t make sense to try and merge actual titles like the Labour-loyal Mirror papers and the UKIP and Tory Express and Star ones, we are fully braced for an attempt to merge, say, sub-editing, reporting and sports coverage roles … the things the management think the readers won’t spot.
“Above all, we know we are going to be confronted by another mass job cutting exercise and the reduction in editorial quality that brings. They may be dancing a jig in the Trinity boardroom and Richard Desmond may be laughing all the way to the bank, but there won’t be any champagne corks popping on the newsroom floors.”
The on-off negotiations have lasted almost two years in total, sometimes looking as if a deal was on the cards only for it cool off amid frequently acrimonious discussions.
In January, when The Drum reported serious talks were back on again, Trinity Mirror played it down even as Richard Desmond stated: “Simon Fox is more interested in doing a deal than I am.”
Desmond’s reaction then was based on Trinity Mirror’s reluctance to go close enough to his asking price, which was then believed to be around £160m, with Trinity talking more in the region of £80m.
Faced with falling circulations and advertising revenue, plus a share price slump which at one stage hit 42%, Trinity Mirror boss Fox is believed to have come back with an offer closer to Desmond’s figure.
In turn, Richard Desmond, facing similar circulation and advertising headaches but – as a private owner – without the same shareholder pressures on him, was willing to compromise. Not least, driven by his well-known waning enthusiasm for the media industry and his passion for becoming a major player on the UK commercial property development landscape.
After earlier talks collapsed, Desmond adroitly put the pressure on Trinity Mirror by slashing the cover price of his own tabloids at a cost Trinity Mirror - as a public company - couldn’t justify matching, to its shareholders.
It has also emerged that at one stage the Express owner favoured a ‘merger structure’ rather than a full sale, in which he would retain a substantial stake in the combined business. But, as Desmond became increasingly disillusioned over the future prospects of print, it’s understood he switched to favouring a full sale, provided the price was right.
And now it finally seems it is.
Media analysts yesterday depicted the proposed deal as the 'biggest shake-up' of Britain's newspaper industry in more than a decade. Trinity Mirror shares made an early gain of 0.8% on the news, valuing the company at £252m, compared to an overall 14% share dip so far this year.
Alex DeGroote, media analyst at Cenkos Securities, said: 'Such a deal might have significant cost synergies for the enlarged group. Trinity has already been acquisitive in this sector, but clearly feels the need for more scale'.
The renewed deal move by Trinity came as latest circulation figures show the flagship daily title the Daily Mirror down to 625,000 copies, a 19% fall on the previous year. The Express sells 381,000, down 10% on the same period.
But some media analysts are distinctly sceptical about the deal representing any long-term boost for the newspaper industry. One analyst who preferred not to be named, told me: 'For all the media excitement, this amounts to putting a sticking plaster on a major hemorrhage. It's a short-term fix, not discovering the Holy Grail or the elixir of newspaper life'.
And, he stressed, although the deal would give Trinity Mirror the biggest share by title ownership of Britain's national newspaper scene---with the Daily and Sunday Mirrors and The People in the same stable as the Daily and Sunday Express and the Daily and Sunday Star--'it still won't provide the same muscle power commanded by the Mail Group titles or Rupert Murdoch in the same marketplace. I suspect Richard Desmond is the guy with the biggest smile on his face right now as he gets out of the game altogether'.
Within hours of the news emerging, the National Union of Journalists stepped in to warn of concerns over the 'implications for media plurality and diversity'. The union's acting general secretary Seamus Dooley is already seeking a meeting with Richard Desmond's management team and is likely to press for the same with Trinity Mirror's top team,too.
"We would want a clear understanding of how the editorial independence of the titles will be maintained. We believe the best interests of staff would be served by the maintenance of independent editorial structures," said Dooley.
Inevitably there are fears among journalists that some titles will ultimately close, with either The People or The Daily Star's sister Sunday edition the likeliest candidates. In a shrinking market, five Sunday newspapers under the same ownership does seem somewhat prohibitive.
The development is also being watched closely by politicians across the board. But the Labour leadership is likely to be more worried than the Tories, given that they are outnumbered by pro-Tory national paper cheerleaders. So, Labour will probably seeking assurances from the Trinity Mirror board that the deal won't dilute the Mirror titles support for their party before deciding whether to back it or challenge it on the grounds of media plurality and ownership concentration grounds.
There are also question marks over the future location of the group if the takeover does get shareholder and regulator approval.
The Trinity Mirror titles occupy several rented Canary Wharf tower floors, while the Desmond papers are located in a building he developed in Lower Thames Street in London's business heart. But neither location is likely to be capable of housing all the staff of five national newspapers and several magazines.
But, say analysts, one of the biggest attraction of the deal is the hue potential saving on printing centres, with both Trinity owning its own printing operations and Desmond not long ago investing in a huge printing plant in Luton. The deal could either see the closure or sale of some print centres or an ambitious expansion into wider commercial contract printing operations beyond thr newspaper and magazine sector altogether.
A senior Labour source close to Jeremy Corbyn told me: "We'll want to look at this carefully for obvious reasons, the Mirror titles are one of a minority of pro-Labour newspaper voices in a sea of hostile ones.
"Given that the MCA are already looking at the Murdochs' Sky bid media plurality is a big public interest issue."
In the City, the view is that if, as expected despite the controversy surrounding it, the Murdoch takeover of Sky does get regulatory clearance, it would be inconceivable the vastly smaller Trinity takeover of the Desmond empire wouldn't also get clearance.
Paul Connew is a media commentator, broadcaster and a former editor of the Sunday Mirror and deputy editor of the Daily Mirror. He is a member of the Society of Editors and a long-standing judge of the British Press Awards.